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2015 - The year of climate change

After 2,000 global rallies and a star-studded UN Climate Change Summit in New York, the climate change agenda has once again raised its head in preparation for 2015. The year will once more see policy-makers trying to achieve a legally binding and universal agreement that will keep global carbon emissions at a level which ensures global warming remains below 2°C.

Despite the lack of agreements, this year’s summit saw the biggest gathering of heads of government to date, which is important to note, as over the next six months every country in the world has to publish a new set of climate targets, as part of the international negotiations towards an agreement in 2015. In addition, some of the speeches reflected new policy commitments, the most notable coming from the world’s biggest carbon emitter China, which committed to publishing a date for when it expects its greenhouse gas emissions to peak.

The world’s emissions trajectory remains poised to increase global temperatures by 3.2°C to 5.4°C in 2100, according to a recent Intergovernmental Panel on Climate Change (IPCC) report. We are predicted to reach a temperature rise of more than 2°C in the next 30 years, which increases the likelihood of extreme and irreversible weather events. At 4°C, the World Bank has predicted the inundation of coastal cities, increasing risks for food production, unprecedented heat waves, substantially exacerbated water scarcity, increased frequency of high-intensity tropical cyclones and the irreversible loss of biodiversity.

To keep global warming to below 2°C, the global economy needs to cut carbon intensity by 6% every year between now and 2100. However, given that current decarbonisation rates are only 0.7% a year and even doubling this rate would lead to a scenario of over 4°C warming by 2100, realistically, time is running out.

At present, the power and industry sectors combined have the biggest carbon footprint, accounting for about 60% of total CO2 emissions, according to the IPCC. With this in mind, to remain below 2°C, 60-80% of today’s coal, oil and gas listed company reserves will have to become unburnable and therefore “stranded.”

Hermes EOS has sought to address concerns in relation to carbon and stranded assets. Through theCarbon Asset Risk Initiative, a project by the Institutional Investors Group on Climate Change (IIGCC) and sustainability leadership organisation Ceres, we have engaged with over 50 global, carbon-intensive companies and continue to work with them to understand and address their exposure to climate change risks.

We have also undertaken a range of public policy work, which included joining some 340 global investors representing $24 trillion in assets to sign the biggest ever global investor statement on climate change, calling on governments to take action that supports investment in clean energy and climate solutions. On top of that, we have asked governments to support a new global agreement at the 2015 UN Climate Change Conference talks in Paris, in addition to national and regional policy measures to reduce carbon emissions. Earlier this year, we attended a gathering of climate finance specialists, which included the chair of the UN Framework Convention on Climate Change (UNFCCC), to discuss investment solutions that will bridge the gap between the finance community and climate change solutions.

In 2015, we will further intensify our engagement efforts on all climate change related issues. We intend to continue supporting movement on public policy and engaging with companies on their specific climate change risks. In addition, we plan to widen our understanding of what renewable technologies are becoming more economically viable and thus appealing to investors.